22 Aug

How to lower the interest rate on your debt


Posted by: Brad Lockey

Debt with a high interest rate means too much hard-earned money going toward interest — and not enough to the principal. Here are five steps to get a lower rate.

By Renee Sylvestre-Williams


Debt is bad enough on its own, but the worst part? The interest, especially on credit cards. Who hasn’t looked at their statement in shock because it feels like the entire monthly payment is going toward the interest and not the principal? 

Interest can add a huge amount of money to your debt. (Google “loan payment calculator” to find out exactly how much interest you’ll end up paying if you make only the minimum payments.) There’s no way to avoid paying interest, but you can pay less interest. All it takes is some planning, persistence and a phone call or email. Here are five steps to save money fast.

1. Do your research
You know all that information that comes with a new credit card? Most of us don’t read it, but it does contain vital information about your card’s interest rate. If you don’t have it, then take a look at your latest statement. It will let you know the interest rate, which may differ depending on the class of debt (purchases versus cash advances, for example). 

2. Know your credit history
It’s easier to negotiate a lower interest rate if you have a good credit history or are facing bankruptcy. Find out your credit score and get a copy of your history by contacting Equifax or TransUnion. Fees are minimal and the order can be free if you make your request in writing via mail. They will send you a detailed breakdown of your credit history and a rating. Having this makes it easier to negotiate a lower rate. 


3. Make the call or send the email
Calling your bank or credit company and asking for a lower interest rate might sound intimidating, but remember: They are used to people calling and emailing all the time. Don’t worry about standing out. Your call doesn’t have to be complicated. Just point out that you’re a good customer or willing to file for bankruptcy and you’ve received offers from other credit card companies. As a result you would like a lower rate on your card, or you will take up an offer from one of the rival companies. 

4. Be persistent
Sometimes you get lucky and they lower the interest rate. Sometimes you don’t, but don’t give up. Ask to speak to a supervisor and ask again for a lower rate. Keep moving up the food chain until you get a satisfactory answer. 

If your request doesn’t work the first call, give it a few days and call again. Keep trying. Remember, they want to keep your business — the credit card industry, while profitable, is also extremely competitive. 

5. Make the switch (if you have to)
Most of the time, your credit card company will lower your interest rate. It’s in their best interest to keep receiving money from you and to keep you as a customer. If they don’t, then it might be time to end your relationship with that company and make the switch to another company that’s offering a lower rate. Transferring your debt to the lower-interest card can save you a lot of money over the course of paying off the debt. 

Putting in a bit of effort to lower your interest rate could be the best thing that happens to you and your debt. But remember, you did all of that so that more of your monthly payments will go toward the principal instead of the interest. Be careful not to compensate by lowering payments or spending more.

13 Aug

Tax Deductible Mortgage Penalty?


Posted by: Brad Lockey

Your mortgae penalty MAY be tax deductible:

There’s one piece of good news about mortgage prepayment penalties: The cost of the penalty can be used as a tax deduction if you are breaking your mortgage to move 40 km or more to be closer to work..

The Canada Revenue Agency has a provision that allows you to deduct the costs of moving, if you are doing so for a job or for full-time study at a university, college or other type of course at a post- secondary level.

Keep the receipts and fill out form T1-M Moving Expenses Deduction. For tax purposes, the mortgage penalties get lumped under “other selling costs, specify” on Line 16 of the T1-M form.

What you need is a good income tax accountant. 
Just send me an email and I’ll hook you up with one that knows the loop holes.

That’s all for today – I’ve kept it simple.

11 Aug

34–44 Age Group Most Indebted


Posted by: Brad Lockey

If you fall between the ages of 34 and 44, you’re most likely grappling with the highest debt load — relative to your net worth — that you’ll see in your lifetime.

That’s according to a newly released report by the Royal Bank of Canada. It found that in 2012 the 34–44 age group had a ratio of household liabilities to net worth that was more than two times the average of all ages, with a growth rate that outpaced all other age groups.

The primary driving force behind this increase? Mortgages.


“The comparatively large increase in leverage appears to be related to the fact that this age cohort made up much of the population of first-time home buyers between 1999 and 2012; a period that also coincided with a historically high rate of house price appreciation,” said report author Paul Ferley, RBC’s Assistant Chief Economist.

“…younger age cohorts have also become significantly more leveraged relative to their 1999 equivalents compared to older age groups.”

RBC cites other factors contributing to this age group’s debt accumulation, including:

  • Significantly lower interest rates, which reduces carrying costs of bigger debt loads
  • A shift in preference for “current consumption at the expense of future consumption, resulting in less saving”
  • Higher incomes, or an expectation of higher incomes in the future (how much of those expectations is wishful thinking is hard to say)
  • Growing comfort with the idea of carrying a higher debt level than in the past

“It is also possible, however, that the increased cost of purchasing a home and servicing a mortgage, particularly for first-time buyers, has left less funds available for other purchases, requiring greater non-mortgage debt,” Ferley wrote.

Outside of mortgage debt, the 34–44 age group saw a rise in leverage attributed to lines of credit as well as auto loans. Student loans were largely unchanged and creditcard debt declined slightly.

On the flip side, real estate was also responsible for substantially improved household balance sheets. “(The) data shows a sizeable 66% improvement in real household net worth from 1999 to 2012, or 4% per annum,” the report states.

That’s hardly surprising, of course, given the run-up in real estate prices in recent years. But prices can also move the other way, while debt stays static. That can turn the tables pretty quickly on someone’s net worth, a point that shouldn’t be understated.


5 Aug

The Inflation Hedge Mortgage Strategy


Posted by: Brad Lockey

The Inflation Hedge Mortgage Strategy is a plan developed to save new and existing clients thousands of dollars while protecting them from the effects of increasing interest rates outside of their fixed or variable rate mortgages.

It was created to solve the problem of rising interest rates which at some point are going to affect your current mortgage.

Over the last couple of years Canadians have experienced historically low interest rates.

As a result, there will be a payment shock when your current 3.44% mortgage rate matures and you will have to renew it at a rate of 5.50% or higher in the future.

An example will better illustrate the benefits of the strategy:

Property Value: $800,000
Down Payment: $200,000
Mortgage: $600,000
Amortization: 25 Years

Monthly Payment: 2,976.65
Fixed Rate: 3.44% for 5 Years without Inflation Hedge
Fixed Rate: 3.44% for 5 Years with Inflation Hedge

Results without the Inflation Hedge Strategy:
Balance at end of 5-year Term: $517,110.08
The monthly payment becomes 3,539.06 at maturity based on a rate of 5.50% on the balance of $517,110.08 and 20 year amortization remaining.
Payment shock of $562.41 at renewal.

Results with the Inflation Hedge Strategy:
Balance at end of 5-year Term: $503,148.08
Payment shock of $0 due to the annual optimization of the mortgage.

Here is how the optimization works:
Year 1 payment = $2977
Year 2 payment = $3103
Year 3 payment = $3214
Year 4 payment = $3308
Year 5 payment = $3384
End of term payment = $3443.50 (new mortgage payment at the same rate of 5.50% on the Inflation Hedge outstanding balance.
Savings of $13,962 over the 5-year term compared to the “Set it and Forget It” method otherwise used.

Using no strategy at a Bank, a borrower would experience a payment shock of $562.40 at the end of a 5-year term assuming that his rate would go from the low 3.44% rate to a more normal 5.50% at maturity.
A fixed rate of 3.44% raising the mortgage payment gradually to the 5.50% target rate will save you $13,962over a 5-year term.

I hope that you can see how the active management of your mortgage can produce significant savings while eliminating the risk of a payment shock at maturity.

Benefits of Inflation Hedge Strategy via Brad Lockey:

1) It actively manages your mortgage on an annual basis
2) It eliminates the risk of a payment shock at maturity
3) It helps you accelerate the timetable of becoming mortgage-free
4) It significantly reduces the amortization(repayment) period of the mortgage
5) It produces substantial savings over a 5-year term

Sound cool???
The annual optimizations are completely optional. I let you know when the lender I place you with raises their rate on the anniversary of your mortgage. You choose to make a change to your payment schedule or you don’t.
I understand “life” happens.
I act as a Mortgage Broker and a debt advisor as well.
Call me to build your custom strategy today.